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What banking policies need revisiting? qualify for CRA credit. We have to stop holding banks

There are three policy areas that need work in the near and business development hostage through the CRA pro-
term. First, the Bank Secrecy Act. Banks and federal reg- cess and we need to modernize how we think about ser-
ulators are getting better at catching criminals who mis- vice areas. Today, it is much too easy for a bank to earn a
use the banking system. One of my priorities is to make satisfactory rating in this area and almost impossible to
the process as effective and efficient as possible. The earn an outstanding rating. Let’s fix it so that banks are
laws and regulations around the Bank Secrecy Act and an- encouraged to help keep communities and neighborhoods
ti-money laundering are intended to protect our finan- vibrant and get appropriate credit for doing so. OCC rat-
cial system from being misused for illegal purposes. But ings and decisions related to the CRA need to be based on
rather than serving that goal, our system has evolved the actual record of how a bank meets its CRA obligations.
into a series of gotchas and other unhelpful activities. We
need a fresh approach. What do you see as the major challenges
The OCC is just one agency in the mix. It acts like for banking in the months ahead?
an umpire in baseball, but the rules are written by other The federal banking system is safe and sound today.
agencies. To fix the system, we will need a collective ef- The industry understands its risks better than ever, and
fort that involves lawmakers, the Treasury Department, bankers have done a great job of taking on higher quali-
the Financial Crimes Enforcement Network and other ty lending. Capital and liquidity are good. When we talk
regulators. Congress has begun to reexamine the Bank about challenges, credit quality is always a driver and we
Secrecy Act to determine what can be improved, and I am are seeing a pattern of weaker underwriting and addi-
optimistic that we can make the system work better and tional risk accumulating at this point in the cycle. The
improve how we protect our financial system. worst loans are made in the best of times. We also have
Second, we need to reexamine the Community Rein‑ to look closely at cybersecurity, which is front of mind
vestment Act (CRA). The original intent of the CRA was for bank executives and regulators. We’ve made a lot of
to encourage banks to lend in their communities. I am progress in this area, but I see opportunity to better har-
a big supporter of this goal and the community groups monize regulatory effort and guidance.
that provide services in their communities—but today, We also need to watch the effect of rising interest
we have an incredibly complex process that has lost its rates on the balance sheets of these institutions after
way. After 40 years, we have a CRA regime that consum- such a long period of historic [low] interest rates.
er groups don’t like, banks don’t like, and, frankly, regu-
lators don’t like. What do you see as the path
OCC ratings and decisions related to the CRA need forward for community banking?
to be based on the actual record of how a bank meets Small, local banks remain the heart of their communi-
its CRA obligations and serves the needs of the com- ties and we need to ensure that they remain part of the
munities it serves. We won’t tolerate groups that do not broader banking landscape in the future. To do this, we
provide services to these communities to disrupt the need greater flexibility to tailor regulatory requirements
process and affect our decisions. Banks will have the for community banks that do not pose the same risks as
independence to determine what groups and activities their larger counterparts. I think we’re seeing momen-
they choose to partner with and invest in, and we en- tum in Washington to make meaningful progress to re-
courage banks to ensure those investments make a dif- duce the regulatory burden on these banks.
ference in the communities they serve. One way to move forward is to return to a simpler
The third area is small-dollar lending. The byprod- capital structure for small banks. I’ve been a banker for
uct of current regulation is that it’s very difficult to get more than 30 years and I need expert help to fully un-
a small-dollar loan at a bank, and most of this activi- derstand the requirements from time to time. We should
ty has been forced out of banking. My goal is to bring not put that kind of burden on smaller banks that do not
small-dollar loans back to banks. Banks should be part pose a threat to our financial system.
of the solution and one choice for consumers who have We also need to be mindful of the burden of regula-
small-dollar, short-term credit needs. tory compliance on community banks and bring a more
common sense approach to our assessment.
Do you consider the Community Aside from burdensome regulation, community
Reinvestment Act to be outdated? banks also need a clearer path to take advantage of busi-
The CRA is 40 years old and after four decades we need to ness opportunities. For instance, there are areas of small
revisit whether we are still achieving our original goal of consumer lending in banking that should be thought
encouraging banks to meet the credit needs of their com- through to allow banks to participate in that space.
munities. We need to simplify and expand what activities Banks have to understand the rules in the new technol-

34 | THE TEXAS INDEPENDENT BANKER